IMF cautions on allowing biz houses into banking space
The International Monetary Fund (IMF) has said that it would be prudent to gain sufficient experience by implementing a comprehensive framework before deciding on the entry of "mixed groups and conglomerates" into commercial banking.
"In the current context, the risks may outweigh the benefits... The legal, operational, and regulatory framework for consolidated supervision of both bank-led groups and financial conglomerates is still missing some important elements," IMF said in its report -- India: Financial System Stability Assessment Update.
The report, released on January 15, comes at a time when the Reserve Bank of India is expected to soon come out with final guidelines for new bank licences.
A number of large corporate houses, including Anil Ambani-led Reliance Group, Religare, Shriram, L&T and Aditya Birla group, are reportedly interested in entering the banking business.
IMF has noted that it would be prudent to first put in place and gain sufficient experience from implementing a comprehensive framework for this purpose before even considering whether to proceed with the entry of mixed groups and conglomerates.
It said the international experience has supported the prudent policy position of disallowing industrial houses from promoting and owning banks.
According to the IMF, consolidated supervision frameworks and capabilities are weak even for bank led groups in the majority of jurisdictions assessed under the Financial Sector Assessment
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